SC1450

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCRA NO 35 OF 2014

HAVILA KAVO
Appellant

V

THE STATE
Respondent

Waigani: Kirriwom J, Cannings J, Kassman J
2015: 30th April, 21st August

CRIMINAL LAW – appeals – appeal against conviction for misappropriation, Criminal Code, Section 383A(1)(a) – elements of the offence – whether government funds were trust funds, subject to conditions – whether appellant had dishonest intent.

The appellant appealed to the Supreme Court against the decision of the National Court to convict him of one count of misappropriation under Section 383A(1)(a) (misappropriation of property) of the Criminal Code, which states:

A person who dishonestly applies to his own use ... property belonging to another ... is guilty of the crime of misappropriation of property.
 
He was a provincial governor and received K131, 338.00 from the provincial government's operating account to pay his outstanding allowances. It was agreed that he was owed that money by the provincial government, but the Public Prosecutor successfully argued at the trial that the sum of K10 million deposited in the operating account just before the money was withdrawn to pay the appellant's allowances came from a State trust account set up specifically for the purpose of funding development projects in the appellant's province and that, the appellant acted dishonestly in getting the money and applying it to his own use when he ought to have known that it was wrong to do so. The National Court held that the appellant, who was a party to the decision of the provincial executive council to pay him from the provincial operating account, had applied to his own use K131, 338.00, the property of the State (as it remained State property as it was never applied to the purpose for which it was required to be applied) and had done so dishonestly and accordingly was guilty of misappropriation. The appellant argued that the National Court erred in fact and law in two ways: (1) finding that the sum of K10 million deposited into the provincial government operating account was subject to trust obligations requiring that it only be applied to development projects, and consequently finding that the sum of K131,338.00 applied by the appellant was the property of the State; and (2) not making a definitive finding of dishonesty against the appellant and consequently not being satisfied of an essential element of the offence. The appellant argued that his conviction should be quashed and a verdict of not guilty entered.

Held: 

(1)	The elements of an offence under Section 383A(1)(a) are that a person:

(i)	applies;
(ii)	to his own use;
(iii)	property;
(iv)	belonging to another person;
(v)	dishonestly.

(2)	Elements (i), (ii) and (iii) were non-contentious. Elements (iv) and (v) were contentious and the appellant was convicted as the National Court was satisfied as to each of them beyond reasonable doubt.

(3)	The National Court erred in fact and law in being satisfied of element (iv) as there was unequivocal and largely uncontradicted evidence from the person who was Secretary for Finance in the National Government at the relevant time that, despite being initially held in and later withdrawn from an account styled as a trust account that carried restrictions as to the purposes to which money in that account could be applied, the K10 million was in fact drawn from a different fund and was allocated by the National Government as an untied grant to the provincial government. This meant that when money was drawn against that K10 million it was not subject to the trust obligations pertaining to other money held in the trust account. It could lawfully be applied to normal provincial government operating expenses, including payment of the appellant's allowances. Once it was applied to such expenses, it ceased to be the property of the State. When the appellant "applied"", "to his own use", "that property" (elements (i), (ii) and (iii)), it was not the "property of another", as it was no longer the State's property. Therefore element (iv) was not established. Ground (1) of the appeal was upheld.

(4)	Element (v), which requires the court to be satisfied that the accused applied the property "dishonestly" to his own (or another's) use, requires a determination of the state of mind of the accused at the time of application of the property. It is a question of fact for the Trial Judge to determine, based on the facts of the case and according to the ordinary standards of reasonable and honest people (Brian Kindi Lawi v The State [1987] PNGLR 183). A subjective test must be applied: it must be proven beyond reasonable doubt that the accused in fact knew that he was acting dishonestly. However, in applying that test, an objective standard can be taken into account: it might reasonably be inferred that the accused must in fact have known that he was acting dishonestly. It is preferable, but not as a matter of law necessary, that a trial Judge make an express finding that the court is satisfied beyond reasonable doubt that the accused in fact knew that he was acting dishonestly. It is sufficient if the reasons for the trial Judge's decision disclose that the court has applied the subjective test and arrived at a reasonable, albeit tacit, conclusion of fact that the accused acted dishonestly. Here the trial Judge applied the correct test and found that the accused should have known that the K131,338.00 was drawn from special development project funds and tacitly and sufficiently, if not expressly, found that the appellant acted dishonestly. The trial Judge did not fail to make a definitive finding of dishonesty. Ground (2) of the appeal was dismissed.

(5)	Though only one of the two grounds of appeal was upheld, the error was significant as it concerned an essential element of the offence. The error, for the purposes of Section 23 of the Supreme Court Act, rendered the verdict unsafe and unsatisfactory and meant that the decision of the National Court was based on a wrong decision of law. Furthermore a miscarriage of justice occurred. Therefore the appeal was allowed.

(6)	As to the consequences of allowing the appeal, a new trial would, in light of the Supreme Court's finding that the sum of K131,338.00 was not the property of the State, have no practical utility. Therefore a verdict of not guilty was entered under Section 28 of the Supreme Court Act.

Cases cited

The following cases are cited in the judgment:

Brian Kindi Lawi v The State [1987] PNGLR 183
Havila Kavo v The State SC App No 23 of 2014, 23.12.14, unreported
James Singo v The State (2002) SC700
John Beng v The State [1977] PNGLR 115
The State v Andrew Ludwig Posai (2004) N2618
The State v Francis Natuwohala Laumadava [1994] PNGLR 291
The State v Francis Potape (2014) N5773
The State v Gabriel Ramoi [1993] PNGLR 390
The State v Graham Yotchi Wyborn (2005) N2847
The State v Mark Mauludu (2014) N5566
The State v Nathan Kovoho (2005) N2810)
The State v Steven Ulaias (2006) N3033

APPEAL

This was an appeal against conviction for misappropriation.

Counsel

I Molloy & S Ketan, for the Appellant
C Sambua, for the Respondent

21st August, 2015 

1. BY THE COURT: Havila Kavo was convicted by the National Court of one count of misappropriation and sentenced to three years imprisonment. He appeals against his conviction.

2. He was indicted on a charge of dishonestly applying to his own use the sum of K131, 338.00, the property of the Independent State of Papua New Guinea. He was convicted, as charged, under Section 383A (1)(a) (misappropriation of property) of the Criminal Code, which states:

A person who dishonestly applies to his own use ... property belonging to another ... is guilty of the crime of misappropriation of property.
 
3. He was the Governor of Gulf Province when in February 2010 he received that sum of K131,338.00 from the provincial government's operating account to pay his outstanding allowances, which had accrued over several years and was payable to him by the provincial government pursuant to determinations of the Salaries and Remuneration Commission. It was an undisputed fact at the trial that he was lawfully entitled to that sum of K131,338.00 and that he was owed that sum by the provincial government.

THE GUILTY VERDICT 

4. The Public Prosecutor presented evidence at the trial showing that:

•	not long before the appellant received the sum of K131,338.00, the provincial government operating account had a debit balance of K179.05,

•	what enabled the sum of K131,338.00 to be drawn against the provincial government operating account was the deposit into it by the National Government of the sum of K10 million,

•	the sum of K10 million was transferred from a State trust account styled as "Petroleum Outstanding MOA Commitment Trust Account",

•	that trust account, operated at Bank South Pacific and governed by a trust instrument, was established under the Public Finances (Management) Act,

•	the trust account was set up for the purpose of funding development projects in Gulf Province, in particular infrastructure projects in the 10-kilometre corridor of the oil pipeline running through the Kikori District.

5. The trial Judge, Deputy Chief Justice Sir Gibbs Salika, accepted that evidence, which was largely uncontested. His Honour then held that:

•	the sum of K131,338.00 obtained by the appellant was in effect drawn from the Petroleum Outstanding MOA Commitment Trust Account,

•	it was subject to trust obligations,

•	it could only be lawfully applied to Kikori infrastructure projects for developmental purposes,

•	it could not lawfully be applied to any other purpose,

•	it could not lawfully be applied to pay the appellant's allowances,

•	it remained the property of the State (the National Government) until it was lawfully applied,

•	the payment to the appellant of the sum of K131,338.00 was improper and an abuse of funds,

•	the sum of K131,338.00 always remained the property of the State, as it was never applied to the purpose for which it was required to be applied,

•	the appellant, by virtue of being the chairman of the provincial executive council (which approved the payment to him) had applied the property of the State to an unlawful purpose.

6. His Honour further held that the appellant acted dishonestly in getting the sum of K131, 338.00 and applying it to his own use when he ought to have known that it was wrong to do so. His Honour accordingly found the appellant guilty as charged.

GROUNDS OF APPEAL 

7. The appellant's lawyers filed a notice of appeal containing 25 grounds of appeal, many of which were poorly drafted, confusing or repetitious. It was accepted at the hearing of the appeal, with the benefit of a synthesis offered by the appellant's counsel Mr Molloy, that they could conveniently be reduced to two grounds of appeal. The appellant argued that the trial Judge erred in fact and law in two ways:

(1) finding that the sum of K10 million deposited into the provincial government operating account was subject to trust obligations requiring that it only be applied to development projects, and consequently erred in finding that the sum of K131,338.00 applied by the appellant was the property of the State; and

(2) not making a definitive finding of dishonesty against the appellant and consequently not being satisfied of an essential element of the offence.

ELEMENTS OF THE OFFENCE 

8. The two grounds of appeal relate to the trial Judge's findings on two distinct elements of the offence of misappropriation. Before addressing those grounds of appeal and explaining how they relate to the elements of the offence, we set out the whole of the provision of the Criminal Code under which the appellant was charged and convicted. Section 383A states:

(1) A person who dishonestly applies to his own use or to the use of another person—

(a) property belonging to another; or

(b) property belonging to him which is in his possession or control (either solely or conjointly with another person) subject to a trust, direction or condition or on account of any other person,

is guilty of the crime of misappropriation of property.

(1A) Notwithstanding Subsection (2), an offender guilty of the crime of misappropriation shall be sentenced —

(a) to imprisonment for a term of 50 years without remission and without parole, if the property misappropriated is of a value of K1 million or upwards, but does not exceed K10 million; and

(b) to life imprisonment if the property misappropriated is of a value of K10 million or upwards.

(2) An offender guilty of the crime of misappropriation of property is liable to imprisonment for a term not exceeding five years except in any of the following cases when he is liable to imprisonment for a term not exceeding 10 years:—

(a) where the offender is a director of a company and the property dishonestly applied is company property; or

(b) where the offender is an employee and the property dishonestly applied is the property of his employer; or

(c) where the property dishonestly applied was subject to a trust, direction or condition; or

(d) where the property dishonestly applied is of a value of K2,000.00 or upwards.

(3) For the purposes of this section—

(a) property includes money and all other property real or personal, legal or equitable, including things in action and other intangible property; and

(b) a person's application of property may be dishonest even although he is willing to pay for the property or he intends to restore the property afterwards or to make restitution to the person to whom it belongs or to fulfil his obligations afterwards in respect of the property; and

(c) a person's application of property shall be taken not to be dishonest, except where the property came into his possession or control as trustee or personal representative, if when he applies the property he does not know to whom the property belongs and believes on reasonable grounds that such person cannot be discovered by taking reasonable steps; and

(d) persons to whom property belongs include the owner, any part owner, any person having a legal or equitable interest in or claim to the property and any person who, immediately before the offender's application of the property, had control of it.

9. The indictment presented against the appellant was in the following terms:

HAVILA KAVO of Orulariau village, Ihu, Gulf Province, stands charged that he between the 5th day of February 2010 and 12th day of February 2010 at Kerema, in Papua New Guinea, dishonestly applied to his own use the sum of ... K131,338.00 the property of the Independent State of Papua New Guinea.

10. It is evident that he was charged and convicted under the first part of Section 383A(1)(a), which, to reiterate, provides:

A person who dishonestly applies to his own use ... property belonging to another ... is guilty of the crime of misappropriation of property.

11. The elements of this particular offence have been described in materially the same way in various cases, including James Singo v The State (2002) SC700, The State v Nathan Kovoho (2005) N2810), The State v Steven Ulaias (2006) N3033 and The State v Mark Mauludu (2014) N5566. It is settled law that to obtain a conviction the prosecution must prove beyond reasonable doubt all the elements of the offence, which are that the accused has:

(i)	applied;
(ii)	to his own use;
(iii)	property;
(iv)	belonging to another person;
(v)	dishonestly.

12. Elements (i), (ii) and (iii) were in this case, as in most cases, non-contentious. When the appellant obtained the sum of K131, 338.00 (in the form of a cheque payable to him) from the provincial government operating account and deposited that sum into his personal bank account, he (i) "applied" that sum (ii) "to his own use" and that sum was (iii) "property", as it fell within the definition of property in Section 383A(3)(a) of the Criminal Code.

13. Elements (iv) and (v) were contentious. The trial Judge in effect found:

•	as to element (iv), that the sum of K131,338.00 was property "belonging to another person", viz the State; and

•	as to element (v), that the appellant applied the sum of K131,338.00 "dishonestly".

14. Ground 1 of the appeal relates to element (iv). Ground 2 relates to element (v).

GROUND 1: FINDING THAT THE SUM OF K10 MILLION DEPOSITED INTO THE PROVINCIAL GOVERNMENT OPERATING ACCOUNT WAS SUBJECT TO TRUST OBLIGATIONS AND THAT THE SUM OF K131,338.00 WAS THE PROPERTY OF THE STATE 

15. The trial Judge ruled that the sum of K131,338.00 was the property of the State as it came from the sum of K10 million deposited into the provincial government operating account and that sum of K10 million came from the Petroleum Outstanding MOA Commitment Trust Account. The sum of K10 million, which included the sum of K131,338.00, was subject to trust obligations. It could only be lawfully applied to Kikori infrastructure projects for developmental purposes. It could not lawfully be applied to any other use, including payment of the appellant's allowances.

Trial Judge's reasoning

16. His Honour was in effect applying the principle established in the leading case Brian Kindi Lawi v The State [1987] PNGLR 183: when a sum of money is allocated to a person subject to conditions that it be applied in a certain way, it remains the property of the person who allocates the money unless and until it is applied in accordance with those conditions. Amet J, as he then was, explained the principle when dealing with the argument that the appellant, who had been convicted of misappropriation of two sums of money totalling K16,000.00 which had been allocated to him for agricultural and road projects, but not applied to such projects, was the legal owner of that money once it was allocated to him:

There cannot be any doubt that the moneys were grants for particular public purposes, with the implied conditions that they be expended on those public purposes. The moneys were most definitely not the appellant's private property to expend on his own purposes or anybody else's as he desired. The two amounts of money were National Government grants and in my view the National Government had a legal and an equitable proprietary interest in them until they were expended on the purposes for which they were granted.

Rejection of defence case

17. When reaching the conclusion that the sum of K10 million, and therefore the sum of K131,338.00, were trust funds, the trial Judge rejected the appellant's argument that they were not trust funds. The appellant argued that:

•	the sum of K10 million was an untied grant to the Gulf Provincial Government, which the National Government had agreed in 2009 to allocate to it following a meeting at Kokopo of stakeholders in the Liquefied Natural Gas project; and

•	the sum of K10 million was allocated under a funding arrangement called "UBSA (Umbrella Benefit Sharing Agreement), which was separate and distinct from the funding arrangement called "MOA" (Memorandum of Agreement) under which money was allocated to Gulf Provincial Government and placed in the Petroleum Outstanding MOA Commitment Trust Account.

18. His Honour gave the following reasons for rejecting those arguments:

20 Counsel for the accused submitted that the K10 million were UBSA funds. Evidence however, is that the K10 million came out from the Petroleum MOA Trust Fund Account No 1001501108. I cannot understand how they can become UBSA Funds when they are drawn directly from the MOA Trust Fund Account. But even if the Funds are UBSA Funds, they are in my respectful view, still trust funds and subject to trust responsibilities.

21 There is also evidence that before the K10 million funds went into the Gulf Provincial Government Operating Account No 1000586498 had a debit balance of K179.05. The evidence of that is Exhibit "MM", not enough to pay the outstanding allowances owed to the accused. Only after the K10 million trust funds were deposited into the Gulf Provincial Government Operating Account were there then sufficient funds to pay out the allowances to the accused. The State submitted that this goes to show that the Gulf Provincial Government Administration officers paid the accused from the MOA Trust Funds.

22 It is clear to me that the K10 million cheque started its journey as MOA Trust Funds drawn from the Petroleum MOA Commitment Trust Account No 10001501108. The K10 million cheque was written out in favour of the Gulf Provincial Government with no explanation as to what it was for and why the K10 million was paid to the Gulf Provincial Government. However, the Gulf Provincial Government happily received it and its Provincial Executive Council sat to make plans as to how it should be used. The Provincial Executive Council (PEC), of which the accused is the chairman, identified the special development to benefit from the funds but at the same time decided that the accused's outstanding allowances should be paid from these funds because according to them (that is the PEC) they were UBSA Funds.

23 According to both the State and the defence witnesses the money was either MOA funds or UBSA funds. The Gulf Provincial Government Expenditure plan which is Exhibit R in these proceedings records it as "K10 million UBSA SPECIAL PROJECT FUNDING". It is therefore apparent on the face of the record that the K10 million funding was for special projects. In other words whether the funding was from the MOA or UBSA funds, the funds were to fund special projects.

24 I heard evidence from Gabriel Yer that the UBSA Funding was not tied to any particular project and that it was up to the Gulf Provincial Government to decide how the funds were to be used. What he failed to tell the court was that the funds came out from the MOA Trust Funds. I agree that it was a prerogative of the Gulf Provincial Government to identify and prioritise which projects the K10 million will be spent on. What Mr Yer also failed to tell the Court was that the K10 million could not be used to pay SRC allowances or overtime payments. Trust Funds by their very nature are held by a person or another for the benefit of another. The Trustee in this case Gabriel Yer and his Department had a duty to carry out the terms of the Trust. Mr Yer and his department were to ensure utmost diligence in discharging their trust duties to ensure that the monies were to be expended on special projects identified by the Gulf Provincial Government. The Gulf Provincial Government and the accused became trustees of the K10 million and ensure utmost diligence in discharging their trust responsibilities.

25 The K10 million was for funding special development projects. The question that arises is whether payment for Provincial Executive Council members, the Governor's outstanding allowances and legal fees come under the category of development projects. Payment of outstanding wages for Provincial Executive Council Members, legal fees, Governor's outstanding allowances under the SRC Determination in my respectful opinion do not qualify as special development projects. For Gabriel Yer to say there were no conditions attached to the usage of the K10 million is with respect very irresponsible from a top government official responsible for looking after the people's money. Mr Yer was the Secretary for Finance at the time and for him to give that type of advice to the government and now to this court was and is with respect a serious dereliction of duty as a trustee of people's money. This appears to be the attitude of some of our so called senior public servants who often erroneously advise that trust monies can be expanded on anything and everything. This is a recipe for abuse of the trust funds. This attitude must not and never be allowed to flourish in this country in the Provincial Government and the National Government. (The State v Havila Kavo (2014) N5738, at paras 20-25.)

Significance of finding

19. His Honour's characterisation of the sum of K10 million as trust funds, and subject to trust obligations, was critical to the finding that that sum, including the sum of K131,338.00, was at all times the property of the State and only became another person's property if and when it was applied in accordance with the conditions of the trust account to which it was subject. Without that finding, the fourth element of the offence of misappropriation would not have been established and the appellant would have been found not guilty.

Did the trial Judge err?

20. Having considered the evidence before the National Court and the well argued and extensive submissions of counsel for the appellant and the respondent in the Supreme Court, and having paid close regard to the clear and coherent reasoning of the learned trial Judge, we respectfully consider that his Honour did err in characterising the sum of K10 million as trust funds, and subject to trust obligations. We have drawn this conclusion for the following reasons:

(a)	The Secretary for Finance, Mr Yer, gave clear and unequivocal evidence that the sum of K10 million was an untied grant.

21. Mr Yer was Secretary for Finance during 2009 and 2010. He was a defence witness. He testified, both orally and through an affidavit admitted into evidence at the trial, that there was a significant difference between two types of funding arrangements put in place by the National Government to assist the provinces affected by the LNG project, mainly Gulf Province and Southern Highlands Province. The funding arrangements were known as 'MOA (Memorandum of Agreement) funds' and 'UBSA (Umbrella Benefits Sharing Agreement) funds'. Mr Yer testified that:

•	MOA funds were subject to guidelines that set out where the funds were to be expended and required project documentation, endorsed by the districts or provinces concerned, to be submitted to the National Government through the National Planning Office and vetted by the Economic Implementation Committee and if a project was in order, payments were directed to that project; and .

•	UBSA funds were allocated following a forum held at Kokopo that led to the Umbrella Benefit Sharing Agreement under which the National Government made a commitment to assist the provinces affected by the LNG project. UBSA funds were not subject to the MOA guidelines, they were allocated in the form of grants to the project-affected provinces.

22. Mr Yer testified that towards the end of 2009 approximately K180 million was transferred from an appropriation in the National Budget (which was about to lapse) and put into an MOA Trust account, as part of the National Budget process, to facilitate the allocation of both MOA and UBSA funds. His evidence was that both MOA and UBSA funds were held within the same bank account. The sum of K10 million was drawn out for the Gulf Provincial Government as a UBSA cheque at end of 2009, deposited into the provincial operating account and became part of the revenue of the Gulf Provincial Government. The sum of K10 million was not subject to the MOA trust guidelines. He facilitated the transfer of that sum to Gulf Provincial Government in his capacity as Secretary for Finance.

(b)	No other evidence effectively contradicted Mr Yer's evidence.

23. At the trial, there were seven State witnesses, whose evidence we now summarise.

(i)	The Honourable Mark Maipakai MP, Member for Kikori, was the complainant. He gave evidence that the sum of K10 million was released to the Gulf Provincial Government under the MOA funding guidelines and was supposed to be spent within a 10-kilometre range of the oil pipeline traversing his electorate. He complained to the Police about the way that the money was spent as it was not being applied to projects within his electorate.

(ii)	Rex Wosai was a member of the Police task force, holding the rank of First Constable, that investigated the matter that resulted in the appellant being charged and convicted. He outlined his involvement in the investigation.

(iii)	Joe Eka was a claims examiner in the Gulf Provincial Government. He testified that the appellant's claim for the sum of K131,338.00 was processed without his knowledge or consent, as he was in Port Moresby, not Kerema, at the relevant time. However, the payment to the appellant was made following correct financial procedures. The payment was made from UBSA funds, not MOA funds.

(iv)	Simon Uriye was acting provincial treasurer for Gulf Provincial Government. He was involved in processing the appellant's claim for outstanding allowances in February 2010. He was told by the provincial administrator that the source of the money to pay the appellant was UBSA funds, not MOA funds.

(v)	Robert Israel Peni was a fraud investigator with Bank South Pacific. He was responsible for complying with search warrants served by the Police on the bank in regard to the investigation into alleged misappropriation by the appellant. He gave evidence as to the transfer of the sum of K10 million from the Petroleum Outstanding MOA Commitment Trust Account held with Bank South Pacific to the Gulf Provincial Government operating account, also held with Bank South Pacific and the transfer of the sum of K131,338.00 to the appellant's personal account, also held with Bank South Pacific. He was unable to say whether the sum of K10 million was from the MOA fund or the UBSA fund.

(vi)	Cathy Ali was an officer of the Department of Finance, holding the office of Assistant Secretary, Trust Accounting Branch. She is responsible for administration of State trust accounts, including the Petroleum Outstanding MOA Commitment Trust Account held with Bank South Pacific. A cheque for the sum of K10 million, payable to Gulf Provincial Government, was drawn against that Trust Account. She said that there was no difference between MOA and UBSA funds. All those funds were deposited into the Trust Account and subject to the trust instrument pertaining to that account, which required all funds to be applied to development purposes and in accordance with the guidelines of the UBSA. However, she had not seen the MOA or the UBSA and was unable to say whether a certain percentage of the funds allocated for Gulf Province were paid directly to the Provincial Government for its use.

(vii)	Kidi Kavoi was a paying officer in the Finance and Treasury section of the Gulf Provincial Government. He was one of the officers who processed the appellant's claim for payment of outstanding allowances. He was instructed by his boss, Simon Uriye, to work on Saturday 5 February 2010 and draw the cheque for the sum of K131,338.00, as the appellant was leaving Kerema the next day.

24. There were two defence witnesses apart from Mr Yer:

(i)	The appellant, Havila Kavo, testified that the sum of K10 million was paid by the National Government as a grant directly to the Gulf Provincial Government as a UBSA commitment and was subject to no guidelines. He knows the difference between MOA funds and UBSA funds. The cheque for K10 million made payable to Gulf Provincial Government was not drawn against MOA funds. It was the prerogative of the provincial executive council to decide on the application of that money. He was by early 2010 owed allowances totalling K131,338.00, which had accrued since 2007, which had not been paid to him as the provincial government had no funds available.

(ii)	Mirou Ua'a was executive officer to the provincial administrator. He gave evidence that he raised the claim for the sum of K131,338.00 to the appellant, in respect of the appellant's outstanding allowances. That claim was processed on 5 February 2010, together with 49 other claims, which, including the appellant's claim totalled K573,500.00. In his opinion the appellant received in good faith what was rightfully due to him in accordance with proper financial procedures.

25. The evidence of three of the State witnesses, Rex Wosai, Robert Israel Peni and Kidi Kavoi, had no bearing on the question of whether the sum of K10 million was MOA or UBSA funding. The evidence of two State witnesses, Joe Eka and Simon Uriye, though not of high probative value, actually supported the defence case that the funds were UBSA, not MOA, funds.

26. The evidence of the complainant, Hon Mark Maipakai, supported the State's case that the sum of K10 million was MOA funding, but his evidence was rather general in nature. It amounted only to his understanding, unsupported by any documentary evidence, of what the sum of K10 million represented. It had little probative value.

27. The most significant State witness was Cathy Ali. Her evidence certainly supported the State's case. However, though her understanding appeared to be that there was little or no difference between MOA and UBSA funds, her evidence (which was given before Mr Yer was called to the witness box) did not directly contradict Mr Yer's evidence. She was not in a position to authoritatively say that the sum of K10 million was an allocation of MOA funding.

28. As for the two defence witnesses other than Mr Yer, the evidence of Mirou Ua'a had no bearing on the question of whether the sum of K10 million was MOA or UBSA funding. The evidence of the appellant was directly in line with Mr Yer's evidence.

29. Thus the only witnesses whose evidence at first glance contradicted Mr Yer's evidence were Hon Mark Maipakai and Cathy Ali. However, Mr Maipakai's evidence was, as we remarked, general in nature and not of high probative value. Mrs Ali's evidence was of greater probative value as she was a senior officer of the Department of Finance, directly responsible for the administration of the Petroleum Outstanding MOA Commitment Trust Account. However, she was not in a position to authoritatively say that the sum of K10 million was an allocation of MOA funding.

30. The upshot was that there was no evidence before the Court which effectively contradicted Mr Yer's evidence.

(c)	No good reason was presented for rejecting Mr Yer's evidence.

31. In our opinion, the evidence of Mr Yer was detailed and authoritative. Mr Yer was the Secretary for Finance at the time. He is the government official who would reasonably be expected to be in the best position to give evidence as to the source of the sum of K10 million and whether it was from MOA or from UBSA funds and whether it was subject to strict guidelines or whether it was an untied grant to the provincial government. We do not consider that Mrs Ali was in a position to authoritatively contradict Mr Yer's evidence; and in any event, she did not directly contradict his evidence.

32. It seems to us that Mr Yer's evidence was necessarily of greater probative value than Mrs Ali's evidence. Yet the learned trial Judge gave greater weight to Mrs Ali's evidence. His Honour stated, at paragraph 19 of the written judgment:

Cathy Ali, a witness for the State in her evidence said that the K10 million was drawn out from the MOA Trust Account and that it is the only cheque for K10 million paid out at the time. She gave evidence that the funds are held in Trust for development project purposes only.

33. As for Mr Yer's evidence, his Honour disregarded it entirely by stating at paragraph 25 of the written judgment:

For Gabriel Yer to say there were no conditions attached to the usage of the K10 million is with respect very irresponsible from a top government official responsible for looking after the people's money. Mr Yer was the Secretary for Finance at the time and for him to give that type of advice to the government and now to this court was and is with respect a serious dereliction of duty as a trustee of people's money.

34. We do not consider that any good reason was put before the Court to disregard Mr Yer's evidence. It was not suggested that his evidence was biased or that he gave his evidence, which strongly favoured the defence case, for any ulterior motive. No submission or finding was made that his demeanour in the witness box was unsatisfactory. We find therefore that the learned trial Judge erred in law when disregarding Mr Yer's evidence, resulting in a finding as to the status of the sum of K10 million (and therefore the sum of K131,338.00) which was against the weight of the evidence.

(d)	There was no legal reason for rejecting Mr Yer's evidence.

35. We appreciate the learned trial Judge's presumption that the sum of K10 million was subject to trust obligations as it came directly from a State trust account styled as "Petroleum Outstanding MOA Commitment Trust Account". That was a reasonable presumption to make. However, the presumption was rebutted by the evidence of Mr Yer, which we have found was not effectively contradicted, who explained that that Trust Account in fact contained UBSA funds as well as MOA funds and that the sum of K10 million was appropriated by the National Government and allocated to the Gulf Provincial Government as UBSA funds.

36. There was no legal reason for rejecting Mr Yer's evidence. At the trial the State did not argue that once UBSA funds were parked in the Petroleum Outstanding MOA Commitment Trust Account, they lost their status as UBSA funds and were 'converted' into MOA funds and subject to the guidelines that applied to MOA funds. No reference was made to any provision of the Public Finances (Management) Act or any other law that would have forced that conclusion. The trial Judge nevertheless, in effect, presumed that that is what happened. In making that presumption, without legal basis, his Honour, in our respectful opinion, erred in law.

Conclusion as to ground 1 of the appeal

37. We find, with respect, that the learned trial Judge erred in fact and law when finding that the sum of K10 million deposited into the provincial government operating account was subject to trust obligations requiring that it only be applied to development projects, and consequently the finding that the sum of K131,338.00 applied by the appellant was the property of the State was made in error.

38. When money was drawn against the sum of K10 million it was not subject to the trust obligations pertaining to other money held in the Petroleum Outstanding MOA Commitment Trust Account. It could lawfully be applied to normal provincial government operating expenses, including payment of the appellant's allowances. Once it was applied to such expenses, it ceased to be the property of the State. When the appellant "applied", "to his own use", "that property" (elements (i), (ii) and (iii)), it was not the "property of another", as it was no longer the State's property. Therefore element (iv) of the offence was not established. Ground (1) of the appeal is upheld.

GROUND 2: NOT MAKING A DEFINITIVE FINDING OF DISHONESTY 

39. Element (v) of the offence of misappropriation, which requires the court to be satisfied that the accused applied the property "dishonestly" to his own (or another's) use, requires a determination of the state of mind of the accused at the time of application of the property. Both the appellant and the respondent agree that dishonesty is a question of fact for the trial Judge to determine, based on the facts of the case and according to the ordinary standards of reasonable and honest people (Brian Kindi Lawi v The State [1987] PNGLR 183).

40. A subjective test must be applied: it must be proven beyond reasonable doubt that the accused in fact knew that he was acting dishonestly. However, in applying that test, an objective standard can be taken into account: it might reasonably be inferred that the accused must in fact have known that he was acting dishonestly (James Singo v The State (2002) SC700, The State v Gabriel Ramoi [1993] PNGLR 390, The State v Francis Natuwohala Laumadava [1994] PNGLR 291, The State v Andrew Ludwig Posai (2004) N2618, The State v Graham Yotchi Wyborn (2005) N2847, The State v Francis Potape (2014) N5773).

41. The appellant argues that the trial Judge erred in law by not making a definitive finding of dishonesty against the appellant and consequently not being satisfied of an essential element of the offence.

42. It is true that the trial Judge did not make an express finding that the appellant in fact knew that he was acting dishonestly. However, his Honour addressed the element of dishonesty carefully and applied the test in Lawi, highlighting that the appellant ought to have known that he could not be paid his allowance from trust funds. His Honour stated, at paragraphs 30 and 36 of the judgment on verdict:

30 While the accused may have had a genuine claim for outstanding allowances, he ought to have known that his allowances could not be paid from the Trust Funds, whether it was from the MOA or UBSA. ...

36 ... the accused should have known or ought to have known with his level of experience and intelligence that, the monies the K131,338.00 was drawn from were special development project funds and not for paying outstanding SRC allowances. Yet he as the Chairman of PEC went ahead and made a decision not only to pay his allowance but receive and use it.

43. We agree with the appellant that it is preferable that a trial judge in a misappropriation case make an express finding that the court is satisfied beyond reasonable doubt that the accused in fact knew that he was acting dishonestly. However, we are not satisfied that it is, as a matter of law, necessary to make an express finding in those terms. It is sufficient if the reasons for the trial judge's decision disclose that the Court has applied the subjective test and arrived at a reasonable, albeit tacit, conclusion of fact that the accused acted dishonestly. Here the trial Judge applied the correct test and found that the accused should have known that the K131,338.00 was drawn from, what the trial Judge found were, trust funds. His Honour tacitly, and sufficiently, if not expressly, found that the appellant acted dishonestly and that element (v) of the offence was satisfied.

Conclusion as to ground 2 of the appeal

44. The court did not err by failing to make a definitive finding of dishonesty. Ground (2) of the appeal is dismissed.

CONCLUSION

45. To succeed on an appeal against conviction an appellant must by virtue of Section 23 of the Supreme Court Act establish that the verdict is unsafe or unsatisfactory, the conviction entailed a wrong decision on a question of law or there was a material irregularity in the trial; and the Supreme Court must consider that a miscarriage of justice has occurred (John Beng v The State [1977] PNGLR 115).

46. In this case, only one of the two grounds of appeal has been upheld. However, the error disclosed in that ground was significant as it concerned an essential element of the offence. The error, for the purposes of Section 23 of the Supreme Court Act, with respect, renders the verdict unsafe and unsatisfactory and shows that the decision of the National Court was based on a wrong decision of law. Furthermore a miscarriage of justice occurred. Therefore the appeal will be allowed.

47. As to the consequences of allowing the appeal, a new trial would, in light of our finding that the sum of K131,338.00 was not the property of the State, have no practical utility. Therefore a verdict of not guilty will be entered under Section 23(3) of the Supreme Court Act, and other consequential orders will be made.

48. As the appellant has been on bail pending this appeal, pursuant to a decision of the Supreme Court in December 2014 (Havila Kavo v The State SC App No 23 of 2014, 23.12.14, unreported), we will order that the sum of cash bail be refunded and that he be discharged of his bail obligations.

ORDER 

(1)	The appeal is allowed.

(2)	The conviction for misappropriation is quashed.

(3)	A verdict of not guilty is entered.

(4)	The sentence is quashed and the warrant of commitment to custody issued by the National Court is revoked.

(5)	Bail money paid pursuant to the order of the Supreme Court of 23 December 2014 shall be refunded upon presentation of a receipt and the appellant is discharged from his bail obligations.

Judgment accordingly.

__________________________________________________________________
Ketan Lawyers: Lawyers for the Appellant 
Public Prosecutor: Lawyer for the Respondent